VIDEO: We’re Selling Out of This Name Ahead of 'Liberation Day'

In today’s Daily Rundown video, Chris Versace discusses why increasing uncertainty around tariffs and fresh cuts to S&P 500 targets will continue to pressure the market ahead of this week’s data deluge and President Trump’s April 2 Liberation Day tariff announcements. 

He also walks through why there are increasing questions over chip equipment spending and how that is prompting us to exit shares of Applied Materials AMAT later on Monday morning, a move that will add to the Portfolio’s defensive posture. 

Finally, Chris lays out the week’s events we’ll be paying close attention to.

Transcript

CHRIS VERSACE: Everyone, Chris Versace here. Monday, March 31. And ahead of the opening bell that we begin the last trading session of the quarter, stocks look to extend the move lower that we saw develop last week.

What do we have? It's a combination of not only renewed escalating tariffs, but fresh cuts for some targets for the S&P 500. We saw some of those last week, but this latest one comes from Goldman Sachs.

And they're saying that in their view, the S&P 500 could top out this year around 5,700. That's not too far ahead of where we closed last Friday. And it's down from their previous target of around 6,200. So I think that's going to roil through the market as well.

The reason why they're doing this cut shouldn't be surprising. It's a lot of the factors that we've talked about last week with the other cuts, but tariff-related uncertainty, concerns over enterprise spending, consumer spending, and of course, in their view now with tariffs, a potentially higher risk of a recession. Doesn't mean we're going to get a recession, but they see an incrementally higher risk.

Still less than 50%. I believe it's somewhere between 20 and 30%, if I remember the numbers correctly, but up from what it was before. That's the key.

We are, I will say, seeing some of this uncertainty translate into businesses dialing back their spending. If you remember, when we got the NFIB small business index, we talked about the uncertainty index being at record levels. So not surprising that companies in a very uncertain environment are starting to dial back spending.

This latest data point is from the Philly Fed's latest manufacturing business outlook survey. Just 23% of firms expect higher capital spending this year. That's down from over 50% in October.

So as we're kind of taking that in, we're also thinking about the impact of auto tariffs and what that might mean for production. And remember, the automotive market is a significant consumer of chips. But we're also at the margins hearing about slower AI and cloud spending. There's an article out on the information that has that.

So as we're kind of sitting here thinking about this, it means that, we could see some excess capacity for chips. And when we think about that, it tells us that perhaps, capital spending levels for semiconductor capital equipment may not be as high as previously expected, again, because of that excess capacity.

So as we think about that, it really means that for us, the shares of applied materials are likely over the next few months to be rangebound, or they could potentially move lower. Now we are down in the position. I understand that.

But here's the deal. We would rather not lose more capital in Applied Materials given these mounting headwinds. So later this morning, when the market opens up, we will be clearing out the portfolio's position in Applied Materials. It will help build our cash, our overall defensive positioning. And it's going to be, I think, a smart move given what's coming this week.

But before we talk about that and our roadmap for the week, let's talk about the market mood. No surprise, there is a lot of angst, a lot of fear, a lot of uncertainty in the market. We can see that simply by looking at the fear and greed index. It is back in extreme fear this morning.

However, the volatility index, the VIX, it did move higher last week, but it is nowhere near levels that says that the market is overdone in terms of moving lower. At the same time, neither the S&P 500 nor the NASDAQ composite as of this morning are oversold based on their RSI levels. So this means that we are going to want to proceed through this week, as you'll see this very hectic week, frenetic week, very carefully.

So what do we have in the coming days? Well, we're going to get the March ISM manufacturing and services PMIs. It's going to be a big input for the vector velocity of the economy, but also what does it tell us ahead of the employment reports we'll get this week and on inflation.

Remember what we saw in the flash March PMIs from S&P Global, employment slowed. Inflation pressures moved higher. New orders were a little weak.

So we'll want to be confirming that when we get the ISM data this week. Remember, why the ISM data? Well, it gets factored into GDP.

So what else do we have this week? ADP's March employment change report. What does that say about job creation? What does it say about wages and potential wage inflation?

We've got the March challenger job cuts report. This is going to be especially important. Remember the February figures for this data set popped. So we're going to want to keep close eyes on that.

My thinking is if we see another hot number here, it's another reason for consumers to kind of retrench in their spending amid even greater uncertainty. Again, layoffs. And then, of course, we'll have the March employment report.

We also have the next wave of Fed speakers, and that's going to include Fed Chair Powell on Friday. Now, normally, Powell's comments are one to focus in on. We all know why.

But this week, they will be even more important. Why? Two reasons. One, they will be coming after all this economic data that we'll be getting this week.

So we'll be very interested in how the Fed chair kind of puzzles through it and what his thinking is, should he share it about the economy. At the same time, Powell's comments, because they come on Friday, they will be coming after President Trump's April 2 liberation day.

This is the day that he's expected to unveil reciprocal tariffs or some other part of his tariff plan. As we learned over the weekend, there's a lot of moving parts here, and it sounds like it could be more than just reciprocal tariffs. Again, that's part of what's pressuring the market today. So safe to say we are going to want to pay very close attention to Powell's words.

Now, I will say this. His comments, they are five days away, and it doesn't seem like it's going to be that long, five days. But as you can see, based on what I rattled off, it is going to be a very frenetic week. And as you know, on top of parsing all the data, we will have to chew through President Trump's tariff announcements and any responses from the countries that he slaps these tariffs on.

Amid all of that, we're going to continue to pay close attention, looking out for any negative earnings pre-announcements we might get this week, connecting the dots as they relate to any positions in the portfolio. So again, hectic, chaotic, nerve wracking. The market is likely to trade based on the most recent headline.

So we're going to want to keep calm. We want to make smart decisions, not emotional ones. And remember, we're in this for the long term. And part of that means we will want to be ready to take advantage of opportunities when they present themselves. But, and this is the big but here, as we've done before, we'll want to make sure that the odds of us getting head faked are as low as possible before we make any moves.

More than likely, that means even though we will be shedding the portfolio's position in Applied Materials later today, absent that, we will be sitting on the sidelines for the most part. You know, we will be responding to new information as it comes in. But our thinking is that with our cash levels now approaching after the Applied exit of around 15%, our defensive position in total, including the inverse ETFs, a little higher than that, will be in a very good position for when the market finds its footing, and we can put capital to work with high confidence.

Now, we're going to have a lot more coming your way today, so please be sure to check your emails, your alerts. And remember that this week's office hours will be today in the form between 4:00 PM and 5:00 PM. The why behind that is, I will be co-hosting Yahoo Finance's catalyst program between 10:00 and 11:00 Eastern on Wednesday morning.

And of course, I hope you'll tune in to see that. But again, stay tuned folks. We've got much, much more coming your way.

At the time of publication, TheStreet Pro Portfolio was long AMAT.